How is income tax calculated in Australia?
Australia’s income year runs from 1 July to 30 June. A resident pays nothing on the first $18,200, then 15% to $45,000 (16% in 2025–26), 30% to $135,000, 37% to $190,000 and 45% above. The Low Income Tax Offset of up to $700 comes off the tax for incomes up to $66,667, and most residents pay a 2% Medicare levy on top.
Non-residents pay 30% from the first dollar, with no tax-free threshold, no offset and no Medicare levy.
What is the income tax rate in Australia?
| Taxable income | Rate |
|---|---|
| A$0 – A$18,200 | 0% |
| A$18,200 – A$45,000 | 15% |
| A$45,000 – A$135,000 | 30% |
| A$135,000 – A$190,000 | 37% |
| Over A$190,000 | 45% |
| Taxable income | Rate |
|---|---|
| A$0 – A$18,200 | 0% |
| A$18,200 – A$45,000 | 16% |
| A$45,000 – A$135,000 | 30% |
| A$135,000 – A$190,000 | 37% |
| Over A$190,000 | 45% |
| Taxable income | Rate |
|---|---|
| A$0 – A$135,000 | 30% |
| A$135,000 – A$190,000 | 37% |
| Over A$190,000 | 45% |
What mandatory salary deductions apply?
- Medicare levy: 2% of taxable income for most residents, reduced or nil for low incomes (in 2025–26, nil at $28,011 or less).
- Superannuation is paid by your employer on top of your salary; it is not deducted from it.
Gross salary and take-home salary
Gross salary is what your contract says before anything is taken off. Take-home salary is what reaches your bank account after income tax and the compulsory employee contributions. Employer contributions are paid on top of your salary and are not taken from it.
Example: A$7,500.00 a month
A resident employee on $90,000 a year in 2026–27.
| Item | Monthly | Annual |
|---|---|---|
| Gross salary | A$7,500.00 | A$90,000.00 |
| Income tax | A$1,460.00 | A$17,520.00 |
| Compulsory contributions | A$150.00 | A$1,800.00 |
| Take-home pay | A$5,890.00 | A$70,680.00 |
Effective income tax rate 19.5%; all deductions 21.5%.
How can employees legally reduce their taxes?
- Work-related expenses you were not reimbursed for are deductible.
- Concessional (before-tax) super contributions are taxed at 15% in the fund instead of your marginal rate, within the annual cap.
- Private hospital cover avoids the Medicare levy surcharge for higher earners.
Frequently asked questions
What is the tax-free threshold in Australia?
$18,200 a year for residents. Non-residents have none.
What changed on 1 July 2026?
The 16% rate on income between $18,201 and $45,000 fell to 15%. It is legislated to fall to 14% from 1 July 2027.
Who pays the Medicare levy?
Most residents, at 2% of taxable income. Low-income earners pay less or nothing, and non-residents pay none.
Why is a low 2026–27 income marked partial?
The Medicare levy low-income thresholds for 2026–27 are set later. Until they are, the full 2% is shown and the result says it may be lower.
Official sources
- PwC Worldwide Tax Summaries (reviewed 12 October 2026): Australia: taxes on personal income, resident and non-resident rates 2025/26 and 2026/27, Low Income Tax Offset. Read 5 November 2026.
- Australian Taxation Office: Tax rates – Australian residents. Read 5 November 2026.
- Australian Taxation Office: Medicare levy reduction for low-income earners (2025–26: $28,011 / $35,013). Read 5 November 2026.
Last reviewed 5 November 2026. An estimate for planning, not tax advice; your employer’s payroll and the tax authority decide what is actually withheld.
← Compare Australia with other countries in the worldwide income tax calculator